Maximizing Pharmaceutical Licensing Opportunities

14 Jul 2011 • by Natalie Aster

“For an increasingly risk-averse industry, licensing deals represent a more affordable, less risky alternative to M&A transactions. They are being used to strengthen pipelines, manage major brand life-cycles, expand or restructure portfolios, access new technologies, and enter new geographical markets.”

The report “Maximizing Pharmaceutical Licensing Opportunities” by Business Insights reviews the key trends in pharmaceutical licensing, examining deal volumes, values and structure. Therapeutic focus is also covered along with detailed profiles of the strategies of 10 leading pharmaceutical companies. The report also sets out future directions for licensing and alliance activity.

Cancer has emerged as the therapeutic area in which most deals are being struck. Other key therapy area targets include infectious disease, CNS disorders, metabolic/endocrine disease and auto-immune/inflammatory conditions. Rights to assets in these five therapy areas were traded in around two-thirds of all deals.

Declared financial commitments to assets licensed by the world’s ten biggest pharmaceutical companies totaled more than US$78bn in the five-year period to 2010. GSK was the biggest contributor to that figure, signing deals involving up-front fees and potential milestone payments that could exceed US$19bn.

Where financial details of in-licensing deals were disclosed, Pfizer committed a total of $9.2bn in up-front payments, research funding and potential milestones attached to agreements reached in the five years from 2006 to 2010. Spending was highest in the early part of the forecast period, with the company's potential outlay on deals struck during 2006 and 2007 totaling more than $5bn. Up-front payments made over the course of the period exceeded $3bn, reflecting the signature of several major deals concerning rights to commercial-stage products. These included a string of transactions involving generic drug manufacturers and a $1.4bn agreement to buy out Sanofi's rights to the inhaled insulin product, Exubera, which had previously been the subject of a collaborative deal between the two companies.

Strengthening the pipeline

Deals targeting technology platforms or development-stage drug candidates have been the main focus of Pfizer's in-licensing activity over the past five years. Most have targeted early-stage projects and, where financial details of individual deals have been divulged, they have been heavily back-loaded, reflecting the degree of risk attached to investments.

The most significant exceptions were Medivation's CNS drug, latrepiridine; the BMS cardiovascular drug, apixaban; and Auxilium's novel biologic, Xiapex (collagenase Clostridium Hostolyticum). All three of these products were much closer to market when Pfizer licensed rights from their respective developers.

Accordingly, it made more substantial up-front payments, handing $225m to Medivation, $250m to BMS and, despite the much smaller commercial potential of Xiapex, a further $45m to Auxilium.

Latrepiridine remains the subject of Phase III trials in Alzheimer's disease patients, but Pfizer looks set to begin recouping investments in apixaban and Xiapex before the end of 2011 following recent regulatory announcements. Xiapex was granted an EU marketing authorization during the first quarter of 2011, clearing the way for the company to begin exercising its exclusive rights to commercialize the product in the 27 EU member states. It holds similar rights in 19 other European and Eurasian markets. EU scientific experts have also recommended approval of apixaban to prevent blood clots in patients who have undergone knee or hip replacement surgery. With final decisions usually following expert committee recommendations, a full EU marketing authorization for apixaban is expected shortly.

Aileron aside, Synta Pharmaceuticals has most to gain from the success of a licensing deal struck with Roche during the past five years. The US biotech banked a modest $16m up-front fee at the beginning of 2009, but could eventually earn up to $1bn in development and commercialization milestones for novel CRACM inhibitors to treat a range of auto-immune and respiratory conditions, including rheumatoid arthritis, asthma and COPD. Roche will also fund all of Synta's research, pre-clinical and clinical development costs in return for global rights to three products. Development milestones across multiple indications for the first product could reach $245m, with half of that amount payable for each of two other candidates. Commercialization milestones of up to $170m were agreed for each of the three products, while Synta will also be eligible for tiered royalties on commercial sales.

Building positions in emerging/branded generic markets

Like a growing number of its competitors, Abbott has begun to target stronger positions in emerging markets, which are forecast to spearhead global market growth through the next five years and beyond. The Solvay Pharma and Piramal Healthcare Solutions purchases have boosted the company's presence in a number of key emerging markets – most notably India, where Abbott now claims an outright leadership position. Across all of its four business segments, Abbott now generates annual revenues of more than $8bn in emerging markets. With pharmaceuticals responsible for around half of that figure, approximately 20% of its global pharmaceutical sales are now realized in emerging markets.

Branded generics acquired through the Solvay and Piramal acquisitions are major contributors to emerging market sales, which received a further boost in 2010 when Abbott struck a licensing and supply deal with Zydus Cadila. The agreement gives Abbott access to an initial portfolio of 24 Zydus products, and rights to commercialize them in 15 key emerging markets. They include drugs for the treatment of pain, cancer, cardiovascular disease, respiratory conditions and neurological diseases. Abbott expects to handle first launches in 2012, and has an option to license more than 40 additional branded generics from Zydus.

Alongside branded generics accessed through Solvay and Piramal, the Zydus-sourced products will be managed as part of a new Established Products Division (EPD), which began operating at the beginning of 2011. Abbott has forecast growth of its business in emerging markets at double digit rates through the period to 2014. By then, the company expects to generate pharmaceutical sales of more than $6bn a year in emerging markets.